International Production Eclecticism

International Production Synthesis Theory

Introduction

The international production synthesis theory is an economic principle that suggests that international production decisions should be based on both domestic and foreign market considerations. It is based on the idea that the combination of domestic and foreign production costs, the degree of market penetration, and the economic efficiency of the combine production decision will ultimately yield the best results. This paper shall look at the theory in more detail and explain the implications of this concept for international companies and their strategies.

What is International Production Synthesis Theory?

The International Production Synthesis Theory (IPST) is a relatively modern economic theory that suggests that international business decisions should take into account both the costs of domestic and foreign production. The theory was first proposed by the economist Paul Krugman in 1991. He argued that multinational companies that engaged in international production could realize improved overall efficiency and strengthened market share if they were to integrate the production costs of both domestic and foreign countries.

The theory suggests that companies should consider the presence of both domestic and foreign production costs when making international production decisions and then decide on whether to manufacture in one country or the other. This decision is based on multiple factors and considerations such as the cost of production domestically compared to that of manufacturing abroad, the degree of market penetration, the amount of investment available to the company and so on.

Implications for Businesses

The IPST has numerous implications for international businesses and the strategies they employ. First, by taking into account both domestic and foreign production costs, companies can lead to more efficient production decisions that maximize returns on investment. They can also gain a greater global market share by engaging in international production and become less dependent on one or two countries for their production needs. Furthermore, by considering the advantages and disadvantages of both domestic and international production, companies can better assess risks and opportunities when making investment decisions.

Conclusion

In conclusion, international production synthesis theory is an important part of contemporary economics and has implications for companies and the decisions they make in terms of international production. The theory is based on a cost-benefit analysis that takes into account both domestic and foreign production costs. Furthermore, it suggests that companies need to consider the degree of market penetration, investment available to the company and other factors when deciding which production strategy to pursue. Ultimately, the IPST can help companies make more informed decisions when it comes to international production, thus helping them maximize returns on investments and increase their global market share.

International Production Intermediary Theory

The international production intermediary theory, also known as the international production sharing theory, is a theory proposed by economist and social theorist Nicholas Kaldor. The theory is mainly used to explain the development and internationalization of capital. According to this theory, international production is organized through production intermediaries such as multinational corporations, which act as facilitators between different countries in the production process.

The Kaldor international production theory includes four characteristics. Firstly, it is common that large-scale and capital-intensive firms, such as multinational corporations, coordinate the centralized production activities such as research and development, finance, marketing and operation which need to be dispersed in a number of countries in different locations. Secondly, capital is highly mobile and flows between countries. Thirdly, international production activities are closely related to inter-company transactions and transactions between companies and other organizations. Lastly, due to a variety of different interests, international production activities are subject to political control to some extent.

The international production intermediary theory was developed to explain the flow of capital from developed countries to developing countries. According to the theory, multinational corporations act as intermediaries between developed and developing countries in the production process. This theory has the great importance for international trade, development and labor in developing countries. These intermediaries increase efficiency, reduce costs and help to transfer technology and knowledge to other countries. Thus, the theory has profound implications for the global economy.